ECONOMY WEEKLY: WEEK OF JULY 26, 2010

“The U.S. government’s response to the financial crisis and ensuing Great Recession included some of the most aggressive fiscal and monetary policies in history…. We find that [these policies] effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0.”
– Alan S. Blinder and Mark Zandi, 7/27/10

Economy Highlight:

• According to the Department of Commerce, new home sales surged in June: “Sales increased 23.6% from the previous month to a seasonally adjusted annual rate of 330,000, the Commerce Department said Monday. Inventories fell, a hopeful sign.” [Wall Street Journal, 7/26/2010]

• A report from the White House shows that government efforts to help save the American auto industry prevented the loss of over a million American jobs.” In addition, according to the Bureau of Labor Statistics, the auto industry is now creating jobs at a record pace: “In the year before GM and Chrysler emerged from bankruptcy, the auto industry shed 334,000 jobs. In the year since, auto industry employment has increased by 55,000 jobs. This is the fastest year-over-year growth in auto employment since 1999.” [White House, 7/29/2010]

Recovery Highlight:

• A new study out this week by Alan Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody’s Analytics and former McCain economist, the actions taken by the government – including the Recovery Act – helped protect our economy from a second Great Depression: “[T]he economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation.” [New York Times, 7/28/2010; Read Study]